Advance fee frauds involve victims paying money in the hope of receiving something of greater value. This type of fraud takes on a myriad of forms, but they share some characteristics in common. Defrauders will often reach out to an investor and offer to pay an exorbitant price for securities owned by the investor, even if these securities are nearly worthless. The investor is sometimes referred to fake website that the defrauder uses to build credibility. The defrauder may pose as a regulator. Once the investor has paid a fee, the defrauder will disappear and the investor loses the money that they paid.
Advance fee frauds often target foreign investors, but domestic investors are not immune. Advance fee fraud “red flags” include cold calls, individuals pretending to be regulators, individuals offering to help investors recover money lost in previous frauds, high-pressure sales tactics, promises that are too good to be true, and fake emails and websites used to build credibility. If a cold-caller offers to buy an investor’s securities for more than they are worth, it is almost certainly a scam and the investor should hang up the phone. If the situation is more ambiguous, the investor should do thorough research, including a broker check. It is important to use the real FINRA BrokerCheck to ascertain the broker’s legitimacy, and not any website or email that they offer.
For more information, see:
- Financial Industry Regulatory Authority (FINRA): http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/FraudsAndScams/P014928 FINRA’s investor alert on Well-Traveled Fraud—Advance-Fee Scams Target Non-U.S. Investors Using Fake Regulator Web Sites and False Broker Identities. http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/index.htm use FINRA's BrokerCheck to check out the caller.
- The Securities and Exchange Commission (SEC): http://www.sec.gov/investor/pubs/fakeseals.htm The SEC's publication on Fake Seals and Phony Numbers: How Fraudsters Try to Look Legit.